Ministries Agree on How to Overhaul Israel's Farm Sector

The transition could save consumers some 2.6 billion shekels in food costs, mostly for dairy products and eggs, says Agriculture Ministry chief.

Reuters

The finance and agriculture ministries finally agreed on a united front this week as they ready to begin talks with growers over an overhaul of state agricultural policy.

The new policy will see a move from a system of production quotas and import duties to direct subsidies.

Sources close to talks between the two ministries told TheMarker on Monday they had reached agreement on all farm sectors except for fruit. Officials hope to open negotiations with growers soon and conclude an agreement by the 2017 deadline to put the reforms into effect.

As revealed by TheMarker last month, the wide-ranging reforms call for ending duties on fresh-farm products and production quotas on milk and eggs, in exchange for providing direct financial aid.

Agriculture and Rural Development Ministry director general Shlomo Ben Eliyahu has estimated that the transition could save consumers some 2.6 billion shekels ($670 million) in food costs, mostly for dairy products and eggs.

Still, the government faces considerable obstacles with growers. The growers are almost certainly going to ask for much higher levels of compensation in exchange for ending the quotas, and trying to keep the agricultural production boards alive, despite treasury opposition.

The Finance Ministry estimates that the bill for direct subsidies won’t cost the government more than 1 billion shekels a year, while the Agriculture Ministry says the cost is more likely to be between 1.2 billion and 1.8 billion shekels. Against that, representatives of the growers estimate that it will cost 4.5 billion shekels.

The growers are also insisting that the reforms are not only designed to reduce the price of food, but also to ensure that growers continue to have sustainable incomes even as they face growing import competition.

Meir Tzur, chairman of the powerful Israel Farmers Federation, warned as much at a recent conference of the Moshav Movement.

“We won’t allow them to end eggs and milk production quotas, and won’t let 3,000 poultry farmers in the north become 200. We won’t let 800 dairy farmers become 20. If someone lets this happen, we’ll fight them with all our power.”

For the dairy cattle sector, the two ministries are calling for a gradual winding down of production quotas, during which the least efficient producers will be encouraged to shutter and get professional retraining and financial aid. They will also be given financial support if imports turn out to be hurting their incomes.

The estimated budget for the dairy cattle program will be about 1.3 billion shekels, spread out over several years. This makes it the single biggest item in the reform program, the sources said.

For the eggs sector, quotas will be rescinded in exchange for more paneling by the government on veterinary services, aid comprising several thousand shekels per month for every grower who drops out of farming, and pension arrangements for them. Coops will grow in size from several thousand animals to 20,000-70,000, to increase efficiency. The total cost of the program will be 500 million shekels over several years.

Other sectors affected include poultry – where the government will, for the first time, allow imports of frozen chickens from Brazil – and fish farming, where local breeders will face more import competition when duties are cut by 50 percent.